Tuesday, October 18, 2016

Central Banking & The Marshmallow Test?
Incrementum's Ronald-Peter Stoeferle makes the analogy of today's central bank monetary stimulated world to psychologist Walter Mischel' testing the "delay of gratification" by offering a desired object - such as a marshmallow - to a child who is told that when the examiner comes back into the room, & the first marshmallow is still there uneaten, then the child will be able to eat 2 marshmallows instead of 1 - but in most cases the child only lasts 6-10 minutes before resorting to gratification ..  "A few years ago, negative interest rates were still unthinkable. Nowadays, public debate is solely concerned with the extent of negative interest rates. The feasibility and the long-term consequences of the so-called “negative interest rate policy” (NIRP) are rarely discussed. We consider it alarming that such measures are implemented without any sound empirical or theoretical proof showing that they will work. However, the introduction of zero or negative interest rates by central banks represents a fatal central-planning intervention. Negative interest rates contradict the logic of human action and lead to numerous distortions as well as a gradual zombification of the economy. Moreover, a world in which it no longer matters when exactly one consumes a marshmallow promotes a “culture of instant gratification” and thwarts the virtues of thrift and restraint."
LINK HERE to the essay

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